Prince Harry Offered Partner Position at Goldman Sachs

Simple answer – it doesn’t. Not very much, at least, and certainly not in the long run. I won’t get into the specifics of the Apple vs Samsung case (TK Arun has taken a look at that over on his blog, and for the most part, I agree with him) save to note that it’s far from certain that Samsung will actually have to pay the full $1.05 billion decided by the jury. This case was just the first stage in a process that will almost certainly involve an appeal by Samsung. And while it’s unlikely that any judge will overturn the jury’s decision entirely, Samsung’s lawyers have enough ammunition to stand a good chance of driving down the damages Samsung has to pay.

The larger context here is iOS vs Android – and there, this case is unlikely to be more than a hiccup for Google (Full disclosure: I use a Samsung Galaxy Nexus and an iPad 2). Taking on the search behemoth directly is a very different prospect from taking on Samsung, and it’s something Apple has avoided so far.

For one, as Google’s official statement points out, the features that were judged to have infringed upon Apple patents were Samsung specific, not part of the stock Android OS. In a way, this verdict might even help Google deal with its fragmentation problem if handset manufacturers like Samsung, HTC, LG et al stick closer to the stock Android experience to avoid the risk of running afoul of Apple with their proprietary skins like Touchwiz and Sense.

The other factor – the more important one – is that Android has now entered that mythical realm of ‘too big to fail’. It’s far more than an operating system. People talk about the Apple ecosystem, but what is often forgotten is that the Android ecosystem – while less closed – is far more extensive in some ways. Think about your daily experience as an Internet user; it’s a fair bet Google dominates it. Search? Check. Mail? Check. Calendar and schedule? Check. Documents, Youtube, maps – the list goes on.

The iPhone and iPad might provide access to these services (and that might be changing now with iOS 6 getting rid of Google Maps and Youtube no longer a core app), but the experience simply isn’t as integrated and complete as it is on an Android device. Just as the money an iOS user sinks into the Apple ecosystem serves as a barrier to keep him from opting out of it, the convenience of that integration of an Android user’s web experience with his mobile OS keeps him from switching camps.

And there’s the price factor. The real growth in the smartphone market over the next few years is going to be in economies like India’s and China’s. Look at the hard numbers. Both countries have a mobile subscriber base of about a billion – slightly above the mark for China and slightly below for India. The total number of smartphones in both countries at the end of 2011? Over 90 million in China and about 24 million in India. That gap between the mobile subscriber base and the number of smartphones coupled with the rate of growth for the latter – 100% expected this year in India – tells you just how lucrative the market is going to be.

Who’s going to exploit that? Not Apple with its limited product stable and high price points. It’s going to be Android OEMs with their large number of phone models at various price levels that appeal to the value for money mentality across various segments in these markets; the OS already has 81% of China’s smartphone market and 48% – 52% of India’s.

Steve Jobs’ dream of crushing Android is going to have to remain unfulfilled in the foreseeable future.

Recent trends in poverty rates should have the country furious at its leaders. When we get the data for 2011 next month, we are likely to see yet another uptick in poverty rates, reversing almost 50 years of economic progress. The percentage of people in extreme poverty, with incomes less than half of the poverty level, is likely to again hit an all-time high since the data has been collected.

Cognizant has done a fabulous job, growing faster than most IT companies around the world for many years. In the process, its revenues have crossed those of several Indian IT companies, notably Wipro Technologies and most recently Infosys Technologies.

As it breached those landmarks, people rushed to anoint Cognizant first as India’s No. 3 IT company and then as No. 2.

But that’s plainly silly. We Indians are prone to appropriate anything that is good around the world as being Indian, but Cognizant is not Indian, certainly not in the traditional sense in which we characterize a company’s nationality. And hence it’s also not India’s No. 2 IT company; nor is it the No. 2 IT company in India.

Cognizant is headquartered in New Jersey, US, and has been headquartered in that country since 1997. It was incubated by Dun &Bradstreet, the global provider of commercial information. Dun & Bradstreet was founded in New York in 1841, and four US presidents, including Abraham Lincoln, worked in the company prior to becoming president. So it’s as American as American can be.

In 1994, Dun & Bradstreet decided to establish an IT arm and it chose Chennai to establish it, in much the same manner that many global companies before and after it had chosen India for their IT operations. It entered India as a joint venture with Satyam Computer and the venture was called Dun & Bradstreet Satyam Systems, where Dun & Bradstreet held 76%and Satyam 24%. Within two years, Dun & Bradstreet bought Satyam’s stake and moved the IT arm’s headquarters to the US.

It does have other major India connections too. Amongst the folks most involved in establishing the IT arm in 1994, several were Indian, including Lakshmi Narayanan, Cognizant’s last CEO and its current vice chairman, and Francisco D’Souza, the current CEO. Three out of its four CEOs have been Indian, including the first, Srini Raju. About 80% of its employees are based in India.

But these are not the elements traditionally used to characterize a company’s nationality. If we use people as the major criterion, we could just as well today appropriate IBM, Accenture, Capgemini and many other global IT companies too.

IBM is very secretive about the geographic distribution of its employees, presumably because it does not want unemployed Americans to get upset that it is taking jobs out of that country. But that’s exactly what it has done. Today, by most estimates, it has close to a third of its 4.3 lakh employees in India, and it likely has more employees here than in the US.

Accenture is also cagey about its numbers, but India currently is said to have 80,000 of its 251,000 employees, and double the US employee strength of 40,000. Capgemini too has about a third of its 1.2 lakh employees in India, significantly higher than its strength in France, where it is headquartered.

Traditionally, company nationality has been based on which country the company is registered and headquartered in, because that then defines its corporate governance procedures, its accounting rules, standards of protection for investors, and in many ways its general culture as well. Since Cognizant is registered and headquartered in the US, its corporate governance practices are governed by what the US lays down. The company generates its profits there, and reports all its financials only in dollars.

But this traditional definition is becoming problematic. What nationality would one ascribe to Accenture? It began as the business and technology consulting division of US accounting firm Arthur Andersen. But when the division split from Arthur Andersen and became Accenture in 2001, it was registered in the tax haven of Bermuda, which many suspect was done to reduce taxes paid in the US. In 2009, it shifted its place of incorporation to Ireland, saying Ireland had a sophisticated, well-developed corporate, legal and regulatory environment. The company is listed in the US, much of its operational administration happens in the US, has a Frenchman as CEO and has its biggest employee base in India.

Infosys and Wipro are Indian, but being listed in the US, their corporate governance practices are strongly influenced by the requirements of US regulators. And they report their financials in both rupees and dollars.

Some define nationality based on the location of the company’s central administration. But this too is showing nascent signs of heading towards redundancy, with communication technologies slowly making distance less important. Cisco board member Wim Elfrink was based in India for four years. Honeywell has a board member based in India. Cognizant’s central administration is largely in the US, but Lakshmi Narayanan was based in India when he was CEO; the company’s CIO was earlier based in Boston but now is in India.

So clearly, defining corporate nationality is not easy. Not that it has become completely irrelevant. Far from it. Huawei is in many ways a global company, but is looked upon with suspicion by many governments because of its Chinese parentage. There was a huge uproar in the US when Dubai Port Trust took over P&O of Britain and consequently also the six port terminals owned by P&O in the US. Dubai Ports eventually had to agree to sell the six terminals to an American company.

But if you look at the issue from the companies’ point of view, more and more want to be viewed as global companies. Cognizant is in fact one of the best examples of this. Here’s what the company says about itself on its website:

“Our business culture reflects the fact that we were `born global’ as a unit of US-based Dun & Bradstreet with operations based in India. As a result, we’ve always been multicultural, which has eased our expansion in more and more markets around the world. Many of our senior managers have extensive international business experience and educational backgrounds. In fact, our CEO (Francisco D’Souza) was born in Kenya, educated in Asia and the US, and has lived throughout the world.”

If Cognizant sees itself as a global company, and believes its success has been largely on account of its being global, there’s no reason why we Indians should jump to appropriate it.

The situation is made even worse by the fact that so many of those in poverty are children. In 2010, 27 percent of all children in the country were reported as living below the poverty level. For African-American children, the share in poverty is approaching 40 percent.

Many will blame the welfare reform law in 1996 that passed with bipartisan support. That is appropriate. This bill involved a great deal of political grandstanding and removed guarantees that could have protected millions of families in a severe downturn like what we are now seeing.

Advocates of this bill who now profess surprise at the result need to turn to a new line of work. There were plenty of people at the time who warned that the lack of federal guarantees could lead to severe hardship in an economic downturn. No one has a right to be surprised on this one. The surge in the poverty rate in a downturn like the present one was a predictable and predicted outcome of the legislation.

However, there is the other side of the story, the overall state of the economy, which is the more important cause of the increase in the poverty rate. The vast majority of the people in this country rely on work for the bulk of their income and that would also be true for the tens of millions of people in poverty, if work was available. These people cannot find jobs in today’s economy, or at least not full-time jobs that pay anything close to a living wage.

The reason why so many of these people cannot find jobs is the incredible economic mismanagement by people with names like Robert Rubin, Alan Greenspan, and Ben Bernanke. These people thought that the bubbles that drove the economy in the last two decades, the stock bubble in the ’90s and the housing bubble in the last decade, were really cool. They somehow thought that either the bubbles would not burst or that it would be easy to pick up the pieces after a crash. In Robert Rubin’s case, he personally profited to the tune of more than $100 million from the housing bubble after he left his post as Treasury Secretary to take a top position at Citigroup.

As much as it is important to have strong safety net protections to ensure that people are able to survive tough times, it is even more important to have a strong economy that can generate good paying jobs. Unfortunately, there is nothing on the political agenda at the moment likely to bring the economy back towards full employment any time soon.

Both presidential candidates claim to be committed to deficit reduction as though there is magical process that causes private businesses to start hiring workers when they see that schools are laying off teachers and defense contractors are laying off factory workers. Just as few politicians had the courage in 1996 to stand up and say that the welfare reform bill would jeopardize the security of millions of families, few politicians are prepared to stand up now and say that we actually need more government investment to create jobs and rebuild the economy.

The reality is that the collapse of the housing bubble created an enormous demand gap in the economy. In the short term, this gap can only be filled by the government, whether we like it or not. Until we do get the economy back on its feet, and start creating the millions of jobs that are needed, the poverty numbers will continue to be horrible. That is why the main route for fixing poverty requires fixing the economy.

Dear Sir,

It has come to our attention that you have been offered a role in a porn film for $10 million. We urge you to reject it.

Princely Pay and Elite Status

Goldman Sachs is prepared to pay you much better than porn, and as a partner, your position will be much more prestigious than the Duke of York’s role as a representative for international trade and investment. We twist country treasurers and central bankers around our little fingers. Politicians are at our beck and call. We even pay a lower tax rate than your grandmother.

As a royal, you’ll regain your rightful status. We’ve managed to pervert capitalism and have even infiltrated our own regulators and government. If you join us, your elite status will be assured in perpetuity.

Department of Jesters

Our mortgage unit, Goldman Sachs Alternative Mortgage Products (GSAMP) was nicknamed “Garbage Sold at Mythical Prices” by financial professionals. In 2007, Ohio barred California-based New Century mortgage lenders from doing business after despicable practices. A complaint of alleged fraud against us detailed our close relationships with imploding mortgage lenders: Countrywide, New Century, and Fremont. They were bailed out, bankrupt, and/or sued.

The complaint showed “an accelerating meltdown for these subprime lenders, and despite known serious loan problems, [we] continued to securitize the loans and sell them in packages of residential mortgage backed securities.” Rotten deals like GSAMP-2006 S3; (a $494 million deal from April 2006) were created and distributed by us and repackaged in other deals.

We paid a record $550 million to settle SEC fraud charges related to one subprime collateralized debt obligation (CDO) called Abacus. But that was chump change to what we would have paid if our GSAMP subsidiary and our own securitization department had been investigated.

Congress and TARP investigators uncovered further damaging evidence. Senator Carl Levin (D-MI), Chairman of a senate investigative panel, issued a memo stating that we at Goldman Sachs “magnified the impact of toxic mortgages.” For example, The Wall Street Journalreviewed data showing that a $38 million subprime-mortgage bond created in June 2006 was referenced in more than 30 debt pools (via derivatives) causing around $280 million in losses to investors by 2008. In other words, we kept repackaging, reselling or buying credit default protection on losers, thus multiplying losses to others many times over on the same trash.

Were we seriously investigated? Were we indicted? Of course we were not. Were any criminal charges brought? Of course they were not.

We dodged questions by claiming we lost money. But that’s the nature of control fraud. Parasites earn high pay while eating their host. That’s why we needed taxpayer subsidies like the bailout of our credit default swap contracts with AIG.

William K. Black, a renowned fraud investigator, explains control fraud in his book, The Best Way to Rob A Bank is To Own One. His team had over 1,000 felony convictions of major financial figures after financial fraud in Savings & Loans resulted in a financial crisis a couple of decades ago. Our current crisis was 70 times larger after we neutered enforcement. Today our Department of Justice (“DOJ”) is our private Department of Jesters.

Mutual Overexposure

You’ve been overexposed. We completely understand that feeling! We felt the same way when we bought credit default protection from AIG on rotten CDOs, some of which we manufactured ourselves for ourselves and for foreign banks. We nearly sunk AIG, but U.S. taxpayers were forced to bail it out.

We nearly went under, too! Washington, the Federal Reserve and Treasury are all in our pocket, so they bailed out AIG’s credit default swaps on which we got a big payday. They paid our friends at foreign banks for which we originated rotten CDOs; thank goodness, or they might have sued us! Our friends in the U.S. government paid 100 cents on the dollar when other bond insurers were settling the same deals for as low as 10 cents on the dollar. We’ll stack our taxpayer subsidies against a royal’s any day.

Oh, and you’ll love this. A German bank sued us for securities fraud over Davis Square VI, one of the CDOs we originated, against which AIG sold protection. Our Department of Jesters is great at looking the other way. No criminal indictments for us!

Divine Right and God’s Work

The Shah of Iran, the son of a mere commoner, claimed he ruled by “divine right.” That didn’t end well for him. We’ve got spin that sounds better. We’ve done deal after deal like the previously mentioned reprehensible trash for which we’ve been unindicted. We call this doing “God’s work.” It’s working out great for us.

Our Apologists Will Lie to Your Grandmother, the Queen

In November 2008, your grandmother asked why no one foresaw the credit crunch. Yet many financial professionals have well documented track records that show they did. Moreover, they warned that high leverage — combined with securities that were a classic situation for fraud — begged disaster.

We handle the media better than you royals. Our media shills say “greed and venality do not make a criminal case.” That sentence is true. But the issue is fraud, which is cause for a criminal case. You don’t think that we used derivatives to reference the same dodgy $38 million bond over 30 times by accident, do you? Securities experts called us out on this B.S. in real time. That Tavakoli woman from Chicago wrote an entire book about CDO malfeasance in 2003. But we took it as a playbook and escalated, and our Department of Jesters is letting us get away with it!

British academics who are useful idiots wrote the Queen that a “psychology of denial” was responsible for intentional behavior. We’d be most grateful if you could keep your grandmother occupied with your shenanigans so she doesn’t ask any more questions.

The Right Stuff

After seeing this snippet in the Daily Mail, we’re 100 percent certain you have the right stuff for a long and extremely lucrative career with Goldman Sachs.:

A witness at the casino said: “[Harry] was playing craps with his friends. They were wasted. He was calling other punters at the table ‘muppets’ and he joked to the dealer that he would kick his head in if he didn’t win.”

We love your jokes! We only ask for a little more discretion. No, we don’t mean about the nude photos; we don’t care about that. But these days when we call our clients “muppets,” there are no witnesses.

We look forward to your answer, and no matter what you decide, let it never be said that you were uninvited by the unindicted.

Yours sincerely,

The Unindicted Goldman Sachs

The New Robber Barons, provides more details on the causes and culprits of the financial crisis. It is only available as an e-book. You must own a Kindle or have installed the Kindle app for PC, Mac, or iPad to download it. You can find it at Amazon US here, at Amazon UK here, Amazon France here, at Amazon Germany here, at Amazon Italy here, or at Amazon Spain here.

Endnote: Jane Wollman Rusoff interviewed me for Research Magazine‘s May cover story, “Finding the Culprits of the Crisis,” about the deep monetary connections of Wall Street and Washington and the corrosive effect it has had on the economy and the Republic.